Singaporean developer Fragrance is struggling to find buyers for more than one-quarter of the apartments in one of central Melbourne’s best known apartment projects, the so-called Beyonce tower.
Around 200 units remain unsold in the 78-storey tower, whose unusual and distinctly curved design was inspired by US pop singer Beyonce. The development has approval for 796 apartments and 167 hotel rooms.
In its latest interim result, Fragrance reported 74.2 per cent of the units were sold. Company records show a stubborn rump of apartments unsold has persisted since 2015, when Fragrance booked in 61 per cent sold in the initial rush of sales following the launch.
Fragrance is controlled by Koh Wee Meng, a billionaire developer famed for building a series of budget hotels in Singapore’s red-light Geylang district.
Sales at a second Fragrance tower just two blocks away are also moving slowly, with less than 45 per cent of units at 555 Collins Street sold cent sold after its launch in June last year.
Fragrance pursued an apartment plan at 555 Collins Street after its plan to develop that site as an office tower and a subsequent effort to sell the site came to nothing.
The unsold apartments on both projects overhang a softening market as developers face tighter lending conditions, while foreign buyers are saddled with new state taxes and surcharges.
“It weighs on supply and prices because you are competing with other overhanging stock,” BIS Oxford Economics analyst Ange Zigomanis said.
“If there are developers who have hit their pre-sale targets, they may be happy to discount or offer some financial incentives to realise the cream, because they have already covered their costs.”
But the overhang can have effects beyond the current cycle, Mr Zigomanis noted.
“It also makes it harder to get pre-sales for the next round of supply because it takes two to three years to turn around an apartment building.
“If Melbourne still has the rocket-fuelled population growth then whatever existing apartments fill up pretty quickly and all of a sudden you’ve got a tight rental market because it takes so long to get the next round of supply up and running.”
A downturn in apartment development in the capital city markets around the country, including Melbourne, is already under way.
Activity fell dramatically in the past year, with developers launching just 128 projects, compared with 248 in the previous year, according to Urbis figures.
In Melbourne, the number of projects almost halved to 33, from 62 in 2016.
Total new apartment sales have almost halved to 11,500 across 92 projects in 2017, compared with 20,400 across 165 projects in 2016.
In contrast to Fragrance’s flagging sales, Mr Koh’s brother, Koh Wee Seng who runs a separate listed Singaporean developer, Aspial, has had significant success on a massive project on the other side of the Yarra River.
Known as Tower 108, the Aspial development is a 101-storey skyscraper rising quickly on Melbourne’s Southbank, where it is set to become the tallest residential tower in the southern hemisphere.
The 1103 apartments of Tower 108 were 98 per cent sold by the end of 2015, the year it was launched.
Back in the CBD, a second Aspial project, the 456-unit AVANT, has also posted strong sales with 97 per cent success rate, according to its latest report.
Fragrance’s Singaporean office did not respond to questions despite inviting inquiry by email.
The story of Fragrance’s unusually shaped skyscraper – its official name is Premier Tower – has taken a number twists already.
It is being built on one of the city’s busiest corners, on the site of the old Savoy Tavern.
The site sat derelict for almost 20 years until its owner, businessman Mark Rowsthorn, facing criticism from Town Hall, returned the single-storey 1970s-era brown brick-veneer building to its former use as a pub.
Soon after Fragrance swooped, snapping up the old pub and its 1800-square-metre land parcel.
In 2015, it was granted approval for a 68-level tower comprising 660 units and 160 hotel rooms, after Planning Minister Richard Wynne cut its height down from 294 metres to 226 metres.
A year later the developer was granted approval for an extra 10 floors after quietly winning agreement from aviation authorities to extend above its approved 68 storeys.
That extension added dozens more apartments to the project, effectively equating to much of the proportion of unsold apartments.
But even before the extra floors had been granted Mr Koh and his family revealed they had bought apartments at the top of the tower, several levels above the number of floors then permitted.
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